Prince With A Thousand Enemies
What Watership Down can teach us about risk: Leadership Signaling, Story Within a Story, Post Truth, Cyber Dollars and Cyber Sense
“You know how you let yourself think that everything will be all right if you can only get to a certain place or do a certain thing. But when you get there you find it's not that simple.”
― Richard Adams, Watership Down
Risk Developments this letter:
Leadership Signaling
Story Within a Story
Post Truth
Cyber Dollars and Cyber Sense
Founding and Falling Myths
Comedies end with weddings and tragedies end with funerals. All great stories are either tales of founding or falling. Timeless epics such as The Epic of Gilgamesh, The Mahabharata, Journey to The West, The Odyssey and The Aeneid all follow the pattern of a fall from grace, exile, search for redemption and reconstitution of greatness, sometimes many times over. These stories have endured because they teach us how to deal with tragedy, what values to embody, who to trust, where to find opportunity and most importantly, why it all matters.
What could these ancient myths have in common with a children's tale of cotton-tails? Watership Down, a bunny epic, is a story concocted by Richard Adams, first for his daughters and then for a wider audience. Adams was deeply influenced by Joseph Campbell’s “Hero With A Thousand Faces,” as was George Lucas. Star Wars profoundly influenced at least one generation, but in 2020 we are a long way from 1977. Through spin-offs, theme park rides, and merchandise Star Wars has become more a brand than an epic. Furthermore, we live in a much more cynical age. Teardowns of Star Wars plot holes abound. Never mind that it’s a space fantasy set in pre-history. Scientific rationalism has corrupted our myth making abilities, but children’s tales cannot be criticized. After all, they are just made up stories for children…
Although you may be familiar with various parallel epics, here is a brief overview of Watership Down, without spoiling the whole story. It all begins in Sandleford warren, where a rabbit named Fiver, who is small and weak, but possesses a sixth sense, has a dream. He foretells the destruction of the warren to his brother Hazel, who leads a band of nine rabbits out of danger. Despite being far from the biggest (a rabbit named Bigwig), the wisest (Fiver), the smartest (Blackberry) or the fastest (Dandelion), Hazel is elected leader of their party.
After surviving a number of threats in the woods, the first place the band of outcasts attempts to settle is a underinhabitted warren with friendly rabbits, plenty of food and a big central hall. It turns out to be a rabbit farm, and after some convincing the band travels on to seek the promised land in Fiver’s visions, which they call Watership Down. There they encounter two survivors from the Sandleford warren who recount its destruction.
Upon settling Watership Down, they realize the warren isn’t sustainable without female rabbits, so they free some from a nearby farm and send messengers to a nearby overcrowded warren to ask if any does want to move. The nearby warren is a totalitarian state ruled by a fearsome rabbit named General Woundwort. Hazel and his gang successfully free some of the does, causing Woundwort to come after them. Only through a combination of teamwork and talents do Hazel and his rabbits defeat Woundwort, whose hubris is his undoing.
There are many lessons about risk to draw from this story, but perhaps the most important are the timeless lessons about teams, leadership and community. Using my favorite definition of risk as “More things can happen than will” and the four exhausted risk control options, avoid, accept, mitigate and transfer, we can describe all sort of founding or falling stories as attempts at controlling risk. In this light, how groups of people work together, under coordination, to develop an organization is the singular risk, a monorisk to go with our monomyth.
Organizational risk has many components, but three of the most important are: team, leadership and culture. The right team, as alluded to above, is about gathering people with the necessary talents and abilities to accomplish a goal, but it is also about coordinating and motivating people to employ their talents. Motivating and coordinating are often confused with leadership, but they are more components of management, which is just one of a leader’s tasks. The difference between a leader and a manager is the difference between motivation and inspiration. Inspiration creates an entirely different, sacred or divine, relationship within a community. This relationship is often called culture.
Teams develop cultures, whether intentionally or not. In Watership down, the minimum viable team includes some wisdom (Fiver), some muscle (Bigwig) and some smarts (Blackberry), but without a coordinator (Hazel) these components never would have come together. Hazel’s primary skill is convincing, but his contribution to the culture is far greater than any other team member’s. As the rabbits’ journey unfolds, other abilities like storytelling (Dandelion), humor (Bluebell), and diplomacy (Strawberry) are needed. An alternative vision for a community, centered around a set of beliefs, is what attracts these new members.
This is where leadership comes to the fore. Hazel, or Aeneas, or Odysseus, do not have discernible skills. Homer describes Odysseus as wily, while Virgil says Aeneas is pious. Hazel’s leadership style is characterized by openness and conscientiousness. Others have looked to Watership Down as a leadership guide and identified these traits as well. For example, Hazel befriends various non-rabbits, a gull and a mouse who both prove useful allies. He also abides by a strict moral code by protecting weaker and smaller rabbits. This is unique among rabbits who seem to mostly organize their communities around strength and size. It is this willingness to do things, not just differently, but differently in a manner congruent with an inspiring value system that defines great leaders.
This brings us to the third and most important component of organizational risk, culture. Much, mostly garbage, has been written about corporate culture, which makes it hard to write about the topic without stepping on some some landmine of business school pablum or management consultant speak. Let me try a different approach by answering the question, “What is a firm?”
There are many prominent theories of the firm that generally belong to three camps: transaction costs, behavioral and asset specificity:
In each of the first two cases we have seen the causes reversed. Market efficiency ruthlessly burst the conglomerate bubble. Owners exacted revenge on managerialism. We will see how robust reputations are… For our purposes, I would like to propose a fourth theory of the firm here. This is the theory of shared beliefs. Firms are arrangements of people with a common belief system, such that instructions and delegation of tasks can be easily communicated and even spontaneously anticipated. Firms exist because people seek a higher purpose.
Watership Down includes multiple stories within the story; myths about the rabbit prince, El-ahrairah, punctuate the story at its most important points. These myths serve to inspire the rabbits. In some cases a story offers them hope to continue their journey, in others it instills courage to fight, and in yet others it offers a resource or cunning trick to use.
Risks are numerous (more things can happen...) and unpredictable (...than will happen), so coming up with a universal way to manage risk is difficult. A shared set of beliefs is the best way to instruct people in how to deal with problems that we are not even yet aware of. Stories are the best way to share a set of beliefs. Firms are the natural result of stories put into action.
Leadership Signalling
Here’s a fascinating story about NS8, a Las Vegas based fraud prevention company that blatantly engaged in fraud itself. The CEO, Adam Rogas, allegedly forged revenue and assets in financial statements provided to investors and auditors. Here’s a 2018 interview with him that has some signs in retrospect, but mostly it is notable for how normal it sounds. He said all the right startupy things about growth, failure, mentorship and product. It’s the lack of specifics that pains me. “Fighting fraud” from advertising, to cybersecurity to e-commerce, is vague and uncontroversial, as are all the best frauds.
One company that does appear to be doing something about improving security is Adobe. They have hired a new Chief Security Officer from video game giant Blizzard. Two perennial cybersecurity bugbears are Adobe Flash and Adobe PDF readers. In retiring Flash, thousands of cybersecurity pros can finally rest a bit easier, although the PDF format is a mainstay of society. One signal that Adobe is serious about security is that the security benefits of shifting to a SaaS based cloud model are actually good for business, a rarity in the security field. The second signal is that the new CSO comes from video gaming. More on this point later.
Other leadership transition news in risk includes Sheila Bair, former FDIC head, joining Fannie Mae’s board, Phebe Novakovic, General Dynamics CEO, joining JPMorgan’s board, and Jack Dorsey, Twitter’s CEO surviving activist investor and congressional calls for his head. I’ll let you read the tea leaves on what these events mean for their respective companies, but keep Hazel and his leadership style in mind.
Story within a Story
Myth making cannot coexist with cynicism, which makes our time a difficult one for building shared value systems. There are few places sheltered from the universal cynicism of our age: children’s stories, maker communities and video games are the only three that come to mind. Video games are especially interesting as a vehicle for world building.
The video game industry has long had to fend off hackers. Creating a sustainable, dynamic, multiplayer system, is after all not that different from creating an organization or economy. Maybe it’s not so surprising then that tech’s push into augmented and virtual reality is drawing visual effects talent away from Hollywood. If myth is the foundation of a shared set of beliefs, there’s going to be a talent war for the best storytellers.
Post Truth
Storytelling is one way to control the narrative, but it’s not the only way. You can’t build a value system by spreading doubt and misinformation, but you can destroy the value systems you are battling against. Without getting into political current events, there’s plenty of interesting news on this front in business and technology.
Verizon launched a blockchain based verification tool to combat fake news. The statement is vague and uncontroversial, but a distributed ledger authenticating the source of information does have potential. It is interesting that a company in the telecommunications space would launch a software product, but because they control the pipes, they might be one of the few organizations positioned to verify the origin of a piece of information.
Coming at it from the other end, Facebook is looking to buy more pipes. It is already an investor in two Pacific undersea cables, and looking to bring cheap, fast internet to more markets where there is potential to grow Facebook users and increase engagement. Whether Facebook has an interest in controlling the narrative or just opening access is not clear, but saying that they are seeking partners with a “shared philosophy” is an interesting approach. Love them or hate them, Facebook has a clear set of beliefs that millions subscribe to.
Cyber Dollars and Cyber Sense
Lastly, for some real post truth cognitive dissonance, check out this report claiming cybersecurity breach reports are down 51% while records exposed have already set record levels in 2020. How is this the case? Are companies simply not disclosing their breaches? Are the breaches less data theft and more ransomware, which are more likely to remain silent? Maybe it’s measurement error or double counting of records?
No clear answer in sight, but the gap between headline and bottom line in cyber continues to grow. This interview with a Chief Innovation Officer of an underwriting firms brings to light three interesting observations from within the industry. First, 90% of P&C insurance is for tangible assets, but 84% of the S&P 500’s value is in intangibles. Second, technology gives us the ability to record changes in dynamic systems, but not to effectively monitor these systems at scale. Third, insurance and tech are colliding as firms snap up technology service providers to bolster controls and reduce losses.
Gratitude
Huge thank you to Roger Farley, Sachin Maini, Vinit Shah, Grant Gregory and Matias Sarmiento for help editing and providing inspiration for this piece. Also, on a personal note, a big thanks to my fiance (you know who you are) who put up with me doing so much writing on our engagement celebration vaction.